This arrangement is set out in NBN's special access undertaking (the SAU). The SAU establishes part of the regulatory framework for the NBN, and includes "important provisions to encourage NBN to incur expenditure efficiently."

"The revenue control provisions in the SAU set out the method for determining the amount of revenue NBN Co is allowed to earn each financial year to recover its costs of providing services," Cifuentes stated.

"Having assessed NBN Co's proposal against the methodology in the SAU, the ACCC has made the draft decision to accept the values proposed by NBN Co for determining allowable revenues for 2014-15."

Where NBN is unable to recover the allowed revenue in a particular year, any shortfall is put into NBN's cost recovery account. NBN will have the opportunity to recover its accumulated losses over time as the take-up of NBN services increases.

[ACCC]

Comments

I find all NBN prices to be excessive and I despise the tiered speed system. Just provide a single service at the highest speed with no download / upload limits for a monthly price. Get rid of the BS and align with the rest of the world.

lol lets look at a couple of ISP's. I shall preface this by saying that I do agree that quota's should be "gotten" rid of.

AT&T (US) - looks like they don't utilise data caps but do tier speeds.
Verizon (US) - Appear to have a similar structure to AT&T and doesn't look like they utilise data caps.
Rogers (US) - has both types in place tiered speed & quota as well as tiered speed
CJ HelloVision (Korea) - SEEMS to only tier on speed

I think what you are missing is that metro areas are required to subsidies the rural areas. So whilst yea "align with rest of the world" is a good concept in theory, doesn't work in Australia. Building a FTTP product in dense metro areas is easy, especially in high rise apartments but what about those small rural areas that has a population of like 3 people or even 100, the economies of scale makes it hard.

People forget NBN stands for NATIONAL broadband network.

Another factor in the price is that the model was built so that the NBN can recoup the cost of building the network.

You are posting here on Gizmodo so you're likely part of the group that wants super fast internet, happy to pay for it, no problem with getting taxed to build the NBN but again, you might want to think about the folks who actually don't care about fast internet, there is a population of people who are at an age that they don't watch netflix, dont play games and simply don't want to pay to build an NBN.

I think we make it difficult. I agree that dense areas of population are subsidising the rural areas and have no problems with that arrangement. However, the NBN is a long term national infrastructure project that should have a life cycle in excess of 30 years with inherent upgradability. The capex cost of the project should be easily captured by the monthly connection costs from both individuals and business. I suppose a tiered speed system with no data cap is a reasonable model, I just like things to be simple.

Speed tiers mean that ISP's can ramp up their provisioning slowly, and share it across multiple users. This keeps ISP costs low while high speeds are not in great demand, which makes low speed tiers affordable to customers.

Data caps are basically a user pays system, and it's quite fair. Most users already don't reach their data caps, so unlimited data would theoretically make no change to their usage. But some users would take advantage of unlimited downloads and ISPs wouldn't be able to cover the costs of those customer's use. Low end users would end up paying extra to subsidise a "greedy" few, which is totally unfair. The cap system ensures that those who are happy with a small amount of data get to pay less, and those who intend to download a lot, pay extra for that privilege.

As data becomes cheaper, caps become larger for the same price and everyone gets a better deal. ISP capacity increases slowly with demand, without needing massive investments in infrastructure right away, and theoretically everything runs smoothly.

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